Gerald Nash (Louth, Labour)

This is just plain stupid. It makes no economic sense whatsoever. We are paying the price now for a stupid promise made by the Tánaiste on the campaign trail this time last year. There is no economic case whatsoever for this. Working people around the country are going to pay the price for it. I am not even persuaded that the Minister for Finance is on board with this. Clearly, this is the agreement. It does not make sense. It is a transfer of wealth from working people to an economic sector that is adding jobs every day. There are multiple more businesses opening than closing, and suddenly we think it is a good idea to spend cumulatively, between 1 July next year and the end of 2030, approximately €2.25 billion on this. Unlike the position with the reduced VAT rate for the sale of apartments where, at least, a sunset clause applies, there is no sunset clause whatsoever here.

We know the difficulty that successive Governments have had in removing this reduced VAT rate and bringing it back up to 13.5%. Whatever thin rationale existed has withered away. As a result, future Governments are going to be burdened with this. In addition, it seems that this Government has abandoned its commitment to indexation for PAYE workers. If you look at the figures, they tell an interesting story. The expenditure of the €2.25 billion on this over the next three to three-and-a-half years equates to two years of indexation. In terms of bringing the band thresholds up, that is €4,000. These are political choices that are being made at the expense of indexation this year or, as Deputy O'Callaghan said, the opportunity to finally rid us of the scourge of child poverty. A political price will paid for this.

There is no rationale whatsoever for this. Anyway, if the Government thought that this was the best way in which to assist the hospitality section, it has a peculiar way of showing it. Bord Bia figures for consumption across the food sector show, in fact, that 40% of the benefit of this VAT cut will go to the large multiples like McDonald's, Supermac's etc., which do not exactly have an extraordinary record in terms of the pay and terms and conditions of their workers. This is not going to be passed on to consumers. It is not going to be passed on to workers in a sector that is absolutely addicted to low pay and poor terms and conditions.

The reduced rate was first introduced in 2011, for good reason. I was involved in developing the idea because there was an opportunity to stimulate a sector where there was some low-hanging fruit and a possibility of it generating quick wins in terms of our economic recovery at a time when over 15% of workers were unemployed. The difficulty successive Governments have had unravelling this has been extraordinary, and there is little or no economic benefit to the wider economy.

This is going to simply boost the bottom line, most disproportionately, of the larger multiples. Even if the Government thinks it is going to assist the local operators we all want to assist, namely the cafés and restaurants that are the backbone of local economies across the country, it will not. It will sustain them for a period but it will not address the fundamental problems we have in the hospitality sector in this country, which independent analysts would say - I agree with them - are energy costs, commercial rates and the attraction and the retention of skilled staff. If the Government wants to do that, it should be approaching this in a different way.

This makes no sense whatsoever. It is a stupid idea - plain and simple. There is no rationale for it whatsoever. It does not make sense. We are constantly being told by this Government, correctly, that our tax base is at risk in terms of our excessive reliance on corporation tax. Here we are, however, narrowing the tax base and doing so at the expense of indexation. As a result, working people are going to pay the price for this next year.

Good luck to the Minister of State when he is explaining this to his constituents in Westmeath over the next period, because it is going to be a challenge. It just does not make sense at all. There is no rationale for it.